During the past few weeks of summer respite, I had been reading The House of Medici: It's Rise and Fall by Christopher Hibbert. Precious metals naturally take a relatively important part in the history of such an illustrious banking dynasty. The fiorino d'oro, or florin, was minted in 1252 at Florence. The florin was already internationally known and well respected during the fifteenth century. This coincides with the heyday of the Medici's as the most powerful banking and political family in Florence and possibly the wealthiest family in Europe during that time. Their wealth, combined with their passion for art, turn them into generous patrons of many Italian artists during that time. This effort fostered a period of proliferation of artistic achievement, later known as the Renaissance.

The florin is the focus of this article. It's a coin containing fifty-four grains of fine gold. The coin has the city's Latin name, Florentia, stamped on its reverse side and the city's emblem, lily, stamped on its obverse side. In terms of purchasing power, here is what the florin can buy in about 1430's:

• A "handsome palazzo" can be bought for a thousand florins.

• A maidservant costs about ten florins a year.

• A man can live very comfortably with an income of 150 florins.

• A "cashier" in the Medici bank is paid with forty florins a year.

• An "apprentice" in the Medici bank earns twenty florins a year.

• The Medici Palace was worth about five thousand florins.

One troy ounce in weight equals to 480 grains.

Assuming that gold has been remonetized and that gold's remonetized value is calculated in the manner proposed by Jason Hommel: equating current M3 value with current official US gold, one gets a value of approximately $35,000/oz (= $9 trillion divided by 261 million ounces; see Hommel's "I'm Insanely Bullish on Silver")

This is an outrageously high value for gold!

But consider first, a "handsome palazzo" can be bought for a thousand florins. One thousand florins has a gold content of 112.5 ounces (= [1000*54]/480). Remonitizing that amount of gold would equate to $3,937,500 (= 112.5*$35,000) of purchasing power today. Today's equivalent of handsome palaces ("palazzo" is the Italian for palace) would be luxury estate, which is usually defined in the real estate profession as single-family residences in excess of $1,000,000. But many would be in the range of several million dollars.

Ten florins, which was a maidservant's yearly salary back in the days of the Medici's, would equate to today's $39,375 (= {[10*54]/480}*$35,000). This roughly equals to CIA's estimate of US GDP per capita: $37,800.

Considering the IRS' highest income tax bracket in the recent years is in the range of $200,000 to $300,000, a man can certainly live very well with amount of gold contained in 150 florins. If remonetized, 150 gold florins would have the purchasing power of $590,625 (= {[150*54]/480}*$35,000).

The Medici Bank was considered the bank in the fifteenth century. It was the most profitable organization in the Europe during that time. Certainly the bank's cashiers and apprentices should be relatively well paid. An apprentice's 20 florins roughly correspond to $78,750 (= {[20*54]/480}*$35,000) today. Goldman Sachs, arguably the most prestigious investment bank on Wall Street today, pays its analysts $55,000. In addition, in good years the entry-level analysts of a typical Wall Street "bulge-bracket" firm can easily be rewarded with approximately $10,000 of bonus (as some of my friends who worked there informed me). This would add up to $65,000.

While I don't know what a typical Wall Street investment bank associate's annual salary is, I do know that top MBA programs are such banks' favorite recruiting destination. Therefore, the average starting salary of, say, a Harvard MBA, should be a fair proxy of an associate's first-year income. Since an associate is the next employment level of an entry-level analyst in an investment bank, an associate's salary should roughly reflect the Medici bank cashier's 40 florins annual salary. For the class of 2002, a Harvard MBA's median first year total compensation is $125,000. This amount approximates 40 florins current purchasing power of $157,500 (= {[40*54]/480}*$35,000).

Finally, the ultra-luxury real estate market routinely sells at $38 to $75 million dollars as reported by a recent Forbes survey of Most Expensive Homes in America. The price of Medici Palace, 5000 florins, represents today's purchasing power of $19,687,500 (= {[5000*54]/480}*$35,000). This is lower than the low-end of recent ultra-luxury estate price range. But considering the Medici's purposely built their main residence "far from grandiose" to avoid jealousy, this "undershooting" of purchasing power should not be surprising.

So, while some may have expressed objection at Hommel's projection of gold's remonetized value of $35,000 per ounce, such a price actually has some validity if one uses it as a proxy for comparing the purchasing power of gold between today and the Italian Renaissance. Put it the other way, if we were to go back to the tradition of using gold and silver as money, an ounce of gold can buy up to $35,000 of goods!

What does all this mean for silver?

Others can and have written better articles than I do on why silver is a better investment than gold, such as silver's supply deficit, industrial use, etc. But the bottom line is, there may exist less above ground inventory of silver than gold, thereby, making silver potentially more valuable than gold if both are monetized. Assuming GATA is right, which I think so, that the central banks have already leased out as much as half of its 30,000 tons of gold, which implies 15,000 tons, or roughly 480 million ounces, of gold remain in the Central Banks' vault. However, the above ground silver inventory is estimated at 200 million to 600 million ounces, with the average estimate at 400 million ounces. And due to silver's supply deficit, this 400-million ounce inventory is shrinking!

Do you see how silver can have the potential to exceed even gold's fabulous $35,000 per ounce projection?